CIT JALANDHAR V. DEEPAK MITTAL PROP. M/S SONALIKA AG. IND. HSRPR

ITA/523/2009

AI Insights

The case revolves around the Commissioner of Income Tax challenging the order of the Income Tax Appellate Tribunal, which had set aside the CIT's earlier order revising the assessment of Deepak Mittal for the assessment year 2003-04. The CIT had invoked revisional jurisdiction under Section 263 of the Income Tax Act, 1961, based on a survey report under Section 133A, but the Tribunal found that the CIT's intervention was unwarranted as the original assessment was thorough and no loss to the revenue was demonstrated. The Tribunal's decision was supported by precedents and a detailed examination of the manufacturing processes undertaken by the assessee, which qualified for deductions under Section 80IB of the Act.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 744777 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 18-02-2010
• Assessment Year: misc
• Other Referred Cases: Shri Hari Shankar Cashew Manufacturing Company v. ITO, Jolly Contractors Pvt. Ltd. v. ITO, Textile Machinery Corporation Ltd v. CIT, CIT v. Perfect Liners
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: VIVEK SETHI
• Keywords: Assessment Year; Manufacturing process; Revisional Jurisdiction; Small Scale Industries; Survey report
• Section: 143(3); 263; 133A; 260A; 80IB(4); 80IB(14)(g)

Judgement Text

"ITA 523 of 2009 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 523 of 2009 Date of decision 18 .2.2010 Commissioner of Income Tax ... Appellant Versus Deepak Mittal ... Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JITENDRA CHAUHAN Present: Mr.Vivek Sethi ,Advocate for the appellant 1.To be referred to the Reporter or not ? 2.Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. The Revenue has approached this Court under Section 260A of the Income Tax Act, 1961 (for brevity 'the Act') challenging order dated 27.5.2009 passed by the Income Tax Appellate Tribunal, Amritsar Bench (for brevity 'the Tribunal') in ITA No. 340(ASR)/2008 in respect of the assessment year 2003-04. The Tribunal has set aside the order dated 28.8.2003 passed by the CIT Jalandhar (1) by exercising jurisdiction under Section 263 of the Act holding that on the basis of survey report conducted under Section 133 A of the Act the assessment completed under Section 143 (3) of the Act on 14.11.2005 by the Assessing Officer cannot be set aside by the CIT by exercising revisional jurisdiction. In that regard, the Tribunal has placed reliance on the views taken by the Hyderbad Bench in the case of Shri Hari Shankar Cashew Manufacturing Company v. ITO 42 ITD 466 and the views of the Amritsar Bench in the case of Jolly Contractors Pvt. Ltd. v. ITO 1982 (2) ITD ASR 92. The aforesaid order of the Tribunal had ITA 523 of 2009 2 attained finality as it is not pointed out that any appeal was filed or if filed the orders have been reversed. The Tribunal has also adversely commented on the order of the CIT because he did not point out that any loss to the revenue would arise and the order passed by the Assessing Officer is essential to the interest of the Revenue. He has simply asked the Assessing Officer to re-examine the documents produced by the assessee whereas the Assessing Officer itself made detailed enquiry and had come to the conclusion on the basis of the evidence on record. In these circumstances, the Tribunal has opined that power of revision could not have been exercised. The Tribunal has also examined the merits of the issue raised before the Assessing Officer and the CIT(A). In an answer to the query given by the assessee it was claimed that he is fully eligible for deductions under Section 801B(4) of the Act. He further stated that definition of small scale industries have been expanded under section 80IB(14)(g) of the Act. The question considered by the Assessing Officer was whether it is indulging in manufacturing process or not. The assessee has been engaged in the production or manufacture of article or thing i.e. Components of tractors like differential Housing, Get Box Housing and Rear Cover Housing. To the allegation that assessee was engaged only in job work, the following question- answer proforma have been cited: “ Q. Please explain the process of the components received after maching from auto Component Indl. Corpn. Baddi, District Solan in details. Ans. Ist operation, on the vertical Machining centre on CNC Machines. ITA 523 of 2009 3 On this CNC Machine drilling, reaming chamfering, pad milling operations are being done, with respect to dowel hole on next machine boring machine/ and taping. After the above operation, Rear Cover will be ready for further assembly. In assembly few important parts like Ram cylinder, response ball, rock Shaft etc.are fitted to complete this sub assembly. It is in respect of two type of rear Covers received after reaching machine from Baddi. Q. From the above it is clear that at Baddi very Small machining/ grinding of components is done, whereas major process is completed at ITL Hoshiarpur, please explain. Ans. All critical machinery operation of chassis parts i.e. Rear cover, Differential housing and reduction unit are being done at M/s ITL Hoshiarpur on precision sophisticated CNC and other special purpose machines. Q. Do you send the similar components for maching and grinding to other concern except Baddi ? Ans. We do not send these three components for Machining/ grinding to any other concern/ place expect Baddi. Q. I am showing you one of twenty six photographs of the com,ponents and machinery and assembly Process taken in your presence, please give the description of the same. Ans. I have given the description at the back side of each photograph under my signatures.” The Assessing Officer has given categorical finding that assessee is ITA 523 of 2009 4 engaged in the process of manufacturing of products and accordingly he has granted concession under section 80 IB of the Act. The Tribunal has placed reliance on a judgement of Hon'ble the Supreme Court in the case of Textile Machinery Corporation Ltd v. CIT 107 ITR 195. In that case the assessee was engaged in the machining of raw-casting, heat treatment of raw-crank shaft and polishing of raw casting etc. and is therefore it has been held that the assessee is engaged in manufacturing or production of articles . Similar view was taken by the Madras High Court in the case of CIT v.Perfect Liners 142 ITR 654. The claim of the assessee has been found to be genuine as the assessee has explained the various processes after the components are received from M/s Auto Components Indl. Corporation Baddi (Solan). It shows that after the receipt of components, the first operation undertaken by the assessee- respondent is the vertical machining centre on CNC machine which has been explained as under: “ One this CNC Machine drilling, reaming, chamfering, pad milling operation are being done, with respect to dowel hole on next machine boring machine/ and tapping. After the above operation, Rear Cover will be ready for further assembly. In assembly, few important parts like Ram cylinder, Response ball, Rock Shaft etc. are fitted to complete the sub assembly. It is in respect of two type of Rear Covers received after reaching machine from Baddi. In respect of differential housing and reduction unit, different sets of machines are there for further operation to make the component ready for assembly. As at present, these ITA 523 of 2009 5 two components are not in stock, as such the working of the same cannot be shown.” Likewise major process is completed by the assessee- respondent and the same has been explained in answer to various questions. “ All critical machinery operation of chassis parts i.e. Rear cover, Differential housing and reduction unit are being done at M/s ITL, Hoshiarpur on precision sophisticated CNC and other special purpose machines” The Assessing Officer has also examined the various workers of the assessee and have then recorded the finding which answer the provisions of Section 81 IB(4) of the Act. Having heard the learned counsel at a considerable length, we are of the view that the order of the Tribunal does not suffer from any legal infirmity or give rise to any such substantive question of law which may warrant admission of the appeal. The exercise of revisional jurisdiction by the CIT is wholly without any justification . It has rightly been held that change of opinion by re-appraising the evidence is not within the parameter of revisional jurisdiction of CIT under Section 263 of the Act. Therefore, the appeal fails and the same is dismissed. (M.M.Kumar) Judge (Jitendra Chauhan) 17.2.2010 Judge okg "